Top Line: The stock market seems to have turned up (as we titled our last post, turn around Friday) and there are no more reasons to sit on the sidelines. There will be several major breathtaking pullbacks much like what we've seen over the past few months but these are to keep people thinking there is a bear market...these pullbacks should be bought.
[Editor's note: The Update will be taking the next week off. The last several weeks have been intense and interesting but we need a break. We will return for our regular post on Sunday evening next week, November 30th, for your reading pleasure on Monday morning December 1st. Have a great Thanksgiving week and remember to be thankful for something. We've all had a good year.]
Tonight as we write, the government has taken steps to bailout Citigroup. This move will back about $300 billion of toxic assets and provide another $20 billion in capital to the troubled bank. Here is a WSJ article that covers some of the highlights or you can find the article online somewhere like this article on CNN Money. It almost seems like just another bailout even though the numbers are staggering.
We are more than ready for a rally and we expect this one to last until sometime around the inauguration on January 20th. Maybe we should expect something similar to the election day rally that led to a 20% drop in the Dow but until then we expect a 30% plus rally to emerge.
In last Wednesday's post, we suggested that the President elect should show himself and that seems to be what he has done. Late in Friday's trading, news surfaced that the NY Fed Governor, Tim Geithner, was the choice for the post of Treasury Sec'y. To us, this is a good choice the little we know about him.
The market seemed to like the Treasury Sec'y news as it rallied about 500 points late Friday. We're not positive that was the reason but the timing was good. There was this matter of the Options' expiration that may have caused some of the up move.
The President elect also mentioned today that he was thinking about a $500 billion stimulus package scheduled for the next two years.
The trading on Friday highlighted the gold mining stocks with GDX jumping over 25% as gold jumped about $50. All of our positions had good gains and should continue to produce good gains until January sometime. The economy will continue to struggle but the market is looking past all of that right now. With all of the money being thrown at these problems, gold is probably telling us that inflation is coming back...Can you say, trillions of dollars of stimulus and bailouts or whatever you want to call them?